The entire distribution is added to your income just like your wages and the amount withheld is added to all your other withholding on the tax return ... then the tax is calculated normally ... if you paid in too much you get a refund of the excess withholding ... if you did not pay in enough you will have a balance due. If you are under the age of 59.5 and you have no qualifying exclusions the distribution is subject to a 10% penalty + fed & state taxes ... you may find the 20% was not enough sadly.
